Crypto exchange Kraken ends staking programme and pays $30mn in SEC case

Crypto exchange Kraken will discontinue its crypto staking programme and pay $30mn in a settlement with the US Securities and Exchange Commission, as the regulator targets digital assets as one of its main enforcement priorities.

The settlement resolves claims from the SEC that Kraken — one of the best-known exchanges in the crypto industry — failed to register the offer and sale of their crypto asset programme. Investors would transfer crypto to Kraken, “staking” their tokens, in exchange for returns of up to as much as 21 per cent, the regulator said.

Kraken sold digital asset “staking services” to the public starting in 2019 and has marketed its staking investment scheme as “an easy-to-use platform”, the SEC said.

The SEC’s announcement follows industry fears of a broader crackdown on crypto staking. Brian Armstrong, chief of US-listed exchange Coinbase said he believed the SEC “getting rid” of staking for retail customers would be a “terrible path for the US”.

In a statement earlier this week, the SEC said emerging technologies and crypto assets were a priority for the regulator in 2023, describing the sphere as posing potential risks to investors and the integrity of US capital markets.

“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws,” SEC chair Gary Gensler said in a prepared statement.

Kraken, which neither admitted nor denied the SEC’s allegations, did not immediately respond to a request for comment.